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Generic strategies Michael Porter

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Rick De Vlieger Rick De Vlieger
25-03-2019 3 mins read

Generic strategies Michael Porter - The Generic strategies of Michael Porter is a management model that you can use to determine the course of a company (the strategy). Generic strategies literally means general strategies. According to Michael Porter, there are four of these Generic strategies that a company should choose from.

I consciously write 'must', because Michael Porter believes that as a company you have to make clear choices. If you do not choose one of these four Generic strategies, you will remain stuck in the middle, and you will be caught up by companies that dare to make a clear choice. Because they specialize, they will either be able to request a lower price for their products, or get a better or more innovative product and then compete you away.

Generic strategies Michael Porter

There are four Generic strategies according to Michael Porter:

  • Cost leadership - you offer a product or service that is in high demand at the lowest possible price.
  • Differentiation - you offer a product or service that is in high demand but with unique characteristics.
  • Cost focus - you offer a product or service in a niche market, and you ensure the lowest possible price.
  • Differentiation focus - you offer a product or service in a niche market, and your product or service has unique characteristics.

According to Michael Porter you can choose from a large market (where you will most likely have a lot of competition) and a niche market where you will probably have less competition. In addition, you can choose to go for a low price in the large or niche market (cost focus and cost leadership). In both cases, the entire strategy must be aimed at operating as cheaply as possible.

However, if you opt for a differentiation strategy, then the price is less important, but as a company you focus entirely on R&D, so that you have the very best or most innovative product on the market. An example of this is Apple. You can also choose to position your brand in a different way. An example of this is the Switsal brand. They make care products. This is a huge market. By only positioning themselves as a baby brand, they have to compete less with other brands such as Dove or Sanox. Switsal and Apple are good examples of companies that have opted for a differentiation strategy in Michael Porter's Generic strategies.

Philips has focused entirely on medical equipment, a clear niche market, certainly if you compare it to the markets from which they have left (e.g. mobile telephony and televisions). This is a good example of a company that has opted for Differentiation focus in Michael Porter's Generic strategies.

Within grocery stores the brand Aldi is a good example of cost leadership. While Albert Heijn as a grocery store brand advertises a lot on TV, Aldi does this much less. In addition, the entire business is focused on making everything, but really everything, as cheap as possible.

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